Taxes 2018: A quick guide for beginners

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Taxes 2018: A quick guide for beginners

Filing your income tax return for the first time can be a scary proposition for a lot of folks. What if you make a mistake? What if you use the wrong form? What if you get audited?

Fortunately, most first-time tax filers typically have a pretty straightforward task ahead of them. It’s so simple, in fact, that the most commonly used tax form among first-time filers is called the 1040EZ — get it? EZ, as in easy. As straightforward as it may be, it can pay – literally – to understand the filing requirements fully and to follow guidelines provided by the Internal Revenue Service (IRS).

Here’s a guide to help any first-timers file taxes without any hiccups.

Figure out if you need to file ...

Not every person who receives income must file a return. There are a number of factors that dictate whether you need to do so, including how much you earned, the source of your income, your age and your filing status. The IRS provides an online questionnaire to help you determine if you need to file. It takes about 12 minutes to complete.

If you’ve withheld taxes from paychecks during the year, you’re probably wise to file even if you don’t meet some of the criteria noted above.

... &, if so, how many returns you need to file ...

If you live in a state that levies a state income tax, you’ll need to file a state tax return as well as a federal tax return. If you’re filing by mail, it’s a good idea to contact your state’s department of taxation for filing guidelines and forms.

... & if you should file electronically or by mail

Most states and the IRS offer free electronic filing for qualifying taxpayers. Filing electronically is faster and easier than filling out the paperwork by hand and mailing it in.

If you are elderly, disabled, have limited English skills or make less than $54,000 annually, you may qualify for free assistance completing your tax return.

Get your tax documents together

Create a file folder for all your tax documents each year. What goes in there? If it has to do with your income and expenses, it’s a good idea to hang onto it. These are things like W-2s, 1099s, receipts, tax statements from investments, student loan interest statements, mortgage interest documents, medical savings accounts contributions and even moving expenses.

Note: Employers have until Jan. 31 this year to send out W-2s for 2017 earnings. Most 1099 forms must also be sent by then.

You don’t have to wait until April

Once you have all your necessary documents together, you can file. The IRS will start accepting tax returns on Jan. 29 this year.

Know the deadline

You have until April 17 (April 15 falls on a Sunday this year) to file.

If you owe & can’t pay, still file

There are penalties if you fail to file your tax return, and there are additional penalty fees for a failure to pay. So, even if you can’t pay right now, it’s important to go ahead and file to reduce any possible penalty payments. Also, keep in mind that you can set up an installment plan with the IRS that will allow you to pay over time.

Review your withholdings every year

Getting a big tax refund may seem like a wonderful thing, but what it means is you’re essentially giving the government your money – interest free – during the year rather than using or saving it yourself. That’s why you need to review your income withholdings each year to ensure you’re getting as close to no return or tax payment as possible after filing your taxes.

Watch out for scams

There are a lot of tax return scams every year. Many involve phone calls from the “IRS” stating you owe back taxes or something similar. Don’t fall for this. The IRS will never contact you by phone. If you receive a correspondence from the IRS in the mail or by email, contact the IRS using the information provided on their website, not what is included in any forms you receive.

Don’t forget the little things

If you’re filing electronically, you’ll be prompted to fill in all the blanks and tick all the required boxes. But if you’re filing manually, it can be easy to make mathematical errors or overlook simple things like signing and dating your forms. Miss a simple step and your return will be rejected, which means your refund will be delayed or, worse, you could end up paying a late penalty if you owe taxes.

Need help?

If you don’t qualify for free electronic filing or assistance, there are still many inexpensive tax prep software services that can help you file your taxes online. Some of these services also provide in-person assistance if you have questions or need additional help. While you can probably handle it all yourself, it’s possible you could miss some important deductions or exclusions, so getting help can be beneficial, even if you have to pay a small fee for it.

Now that you've covered the basics, you can read more details about how to file taxes in 2018 here.

Image: DaniloAndjus